Debt collection law firms are different from your run-of-the-mill debt collectors.

They’re even scarier.

Both groups have nasty reputations for hounding consumers in hopes of collecting outstanding debt – debt that has often been sold and resold for pennies on the dollar. The Federal Trade Commission reports debt collectors (including debt collection law firms) now generate more complaints than any other industry – nearly 200,000 in 2012 alone.

“Debt collectors and debt collection law firms make used car sales persons look honest,” says Shawn Bozarth, a Pennsylvania attorney who uses the back-office support and software services of Morgan Drexen. “Debt collectors buy the right to sue consumers at pennies on the dollar, then attempt to collect the debt through a lawsuit in which they never have to show up. Often they fail to produce any supporting evidence or a person to testify about the truth of the debt or the amount. Debt collectors frequently skirt the edges of debt collection laws.”

The most common complaints involve harassing debtors at home and at work, demanding a larger payment than is owed, threatening debtors (with jail or even physical violence), and failing to identify as a collector.

Law firms, because of their inherent legal muscle and propensity to sue, can go even further in their quest to corner debt-strapped consumers. Here are three common – and questionable – tactics frequently employed by debt collection law firms:

1. Automating Debt Collection Lawsuits

Debt collection law firms have been flooding courtrooms with hundreds of thousands of lawsuits seeking repayment – and they now have high tech help. Many firms are relying on computer software that automates the process of identifying and suing people in debt. These “robo-lawsuits” have been compared with the “robo-signing” controversy that plagued the mortgage industry in recent years. One debt collection law firm in New York State was recently exposed for filing roughly 80,000 lawsuits per year, all with a staff of just 14 lawyers. That amounts to more than 5,700 cases per lawyer. Computer efficiency indeed.

2. Seeking default judgments

So if the cases are so flawed, why file so many lawsuits? In two words: default judgments. The New York Times reports roughly 95-percent of credit card debt lawsuits result in default judgments against the consumer. The reason is simple: consumers don’t show up in court. Some either ignore the summons to appear in court (big mistake), or never receive them. There have been numerous instances of the wrong person with a similar or identical name being targeted. A default judgment is serious business. It clears the way for the law firm or owner of the debt to pursue wage garnishment, property liens and bank account garnishment against the debtor. Default judgments can equal easy money for law firms, debt collectors and creditors – so drowning the courts with lawsuits is a low-risk, high-reward strategy.

3. Seeking settlements during a lawsuit

Sometimes opposing attorneys (when they show up) will try to cut a deal with defendants in the courthouse hallway before they even head inside the courtroom. Often they are looking for people who seem vulnerable, have no legal representation, or may be afraid to appear before the judge. While cutting a courthouse deal is not illegal, often the terms of these on-the-spot settlements are far less favorable than what would occur if the two sides simply went inside the courtroom and told their stories to the judge.
Bottom line: if you are facing a lawsuit from a debt collection law firm, whether the debt is legitimate or not, don’t ignore it. It can cost you plenty. Having an experienced lawyer on your side may be the best way to defend yourself against these questionable tactics.

About Morgan Drexen:

Morgan Drexen provides software and administrative support services to business across the United States, including attorneys who practice bankruptcy and debt settlement as well as tax, personal, and litigation defense. The company’s genesis in 2007 was in the debt settlement arena. Since its founding, Morgan Drexen has provided administrative support services to attorneys who have settled more than $418 million in consumer debt. The company’s focus on efficiency has allowed attorneys to bring financial relief to nearly 12,000 people nationwide, many of whom may otherwise not have been able to afford the services of an attorney.

A proud day for Morgan Drexen!  On May 9, 2013, a story about our company’s advanced bankruptcy software system appeared on Nasdaq’s “big screen” in Times Square in New York City.  Pretty cool!

You can read about Morgan Drexen’s Automated Bankruptcy Module (ABM) in this Wall Street Journal posting:

Morgan Drexen Surpasses Competition, Impresses Lawyers With Bankruptcy Software

Automated Bankruptcy Module Works in Harmony With Existing MDIS Legal Support Software Platform; Allows for “One-Touch” Online Filing in Some Jurisdictions

COSTA MESA, Calif., May 8, 2013 (GLOBE NEWSWIRE) — Morgan Drexen Integrated Systems (http://morgandrexen.com), a leading provider of software and support services to businesses across America, has added another innovative layer to its integrated software services. The Automated Bankruptcy Module (ABM) dramatically simplifies and automates many of the critical and time-consuming tasks required of today’s bankruptcy attorneys. The software allows bankruptcy attorneys who use Morgan Drexen’s software services to easily and seamlessly integrate their existing attorney client data into a bankruptcy module that allows for the efficient processing and filing of bankruptcy petitions. Prominent features of ABM include:

• Ability to access debtor information from existing client files managed on the Morgan Drexen Integrated Systems (MDIS) platform
• Ability to access bankruptcy attorney information
• Ability to access creditor information
• Ability for attorneys who use Morgan Drexen to access the software on the MDIS platform at any time through their attorney portal for review, acceptance, and dynamic revisions to the bankruptcy petition
• Ability for attorneys to instantly send instructions and log notes to their petition processors, paralegals, and bankruptcy liaisons
• Ability to access one-touch electronic filing of petitions in select states

“As our company began to flourish in 2009, I thought it was time to return to a project that began during 2007, the first year of the company’s existence,” explains Walter Ledda, Morgan Drexen CEO. “In June of 2010, I announced the roll out of an initiative for Morgan Drexen to expand its services to include a national bankruptcy support group. I wanted our bankruptcy tools and services to rival the best that existed in the industry. In 2009, I committed company resources and sent a directive to our software development group to begin development. What resulted is a sophisticated and powerful component of our MDIS system. Frankly, I think ABM now serves as the new industry standard.”

The Automated Bankruptcy Module is proving to be a popular draw for the nearly 100 bankruptcy attorneys who utilize the support services of Morgan Drexen.

“The ability to quickly and easily import data directly into the bankruptcy software and integrate paralegal and paraprofessional support is what sets this system apart from the competition,” says bankruptcy attorney Nancy Jin. “ABM offers numerous other advantages, including the ability for attorneys to access the software online and to utilize one touch electronic filing.”

About Morgan Drexen:

Morgan Drexen (www.morgandrexen.com) provides integrated software systems and administrative support services to businesses nationwide. Founded in 2007, the company specializes in developing back-office efficiencies for small law firms and other businesses. Morgan Drexen’s proprietary MDIS software improves workflow through the use of automated document management. In addition to computer technology, Morgan Drexen provides law firms and other businesses with marketing, marketing support, call centers, outsourced litigation support, databases, work-product retrieval systems and cloud-computing platforms facilitated by the company’s outsourced support staff. Morgan Drexen employs more than 300 professionals out of its headquarters in Costa Mesa, CA.

CONTACT: Karen E. Carlson
800-868-1458 x212
karen.carlson@mdrexen.com

Credit Card Companies Enter New Year Targeting Debtors

Will the economy’s bad luck turn around in 2013? Fiscal cliffs, debt ceilings, slow job growth and consumer anxiety are all proving to be major barriers to the long-awaited economic recovery. Analysts are tilting toward optimism, but predicting what will happen with the economy is risky business. One key indicator may be the consumer credit sector. Americans are now carrying nearly $3 trillion of consumer debt, a record high. But there’s mixed news in that number. Credit card debt has actually dropped in recent years, all while student and auto loan debt has soared. Morgan Drexen spoke with several attorneys who specialize in consumer credit issues, including bankruptcies and debt settlement. These are the attorneys who assist people at their lowest financial point. Here are the top five consumer credit trends they see heading into 2013.

1. Creditors Suing for Small Amounts

Credit card companies are not afraid to sue their customers over outstanding balances who are not represented by an attorney. It happens all the time. In fact, the New York Times recently exposed some of the questionable tactics creditors use to recoup their losses. What’s changed, according to California attorney Timothy Reed, is the amounts creditors are now suing for.

“I’ve seen a lot more lawsuits for a lot smaller numbers,” says Reed. “I’ve seen lawsuits for less than $2,000 dollars. That’s extremely surprising to me. Ordinarily that wouldn’t even be a small claims suit.”

Nebraska attorney Kirk Goettsch says he’s shocked not only at the amounts creditors are suing for, but how quickly they’re doing it.

“Lawsuits are being filed regularly against [consumers] who are behind [as little] as 60 days!” says Goettsch. “Often by the time we’ve gotten to the point where they’re coming to see me, many options aren’t even there, because the creditors have already gone past that – some have already filed suit. Some may already have judgments against them.”

The move to go after consumers for lower amounts may be the indirect fallout from the federal credit CARD Act of 2009. The legislation was aimed at protecting consumers by limiting interest rate hikes and providing strict guidelines on credit terms, fees and collections. Analysts say the law has been effective in limiting certain abuses, but has also prompted credit card companies to dig into their couch cushions for more revenue. Suing more people for smaller amounts is part of that effort, and it’s likely to continue in 2013.

2. Debt Collectors Getting More Aggressive

Credit card companies like to outsource their dirty work. Enter the debt collectors. Debt collection agencies usually earn a fraction of the overall amount owed, so it stands to reason they will be aggressive in going after that money. Although there are limits as to what they can do or say, some debt collectors ignore the rules. Oregon attorney Erik Graeff says debt collectors have sharpened their game.

“They seem to have a better feel for who they can bully,” says Graeff. “Somebody who’s unrepresented; somebody who is a little less sure with regards to their rights and their debts. Collections and creditors have really developed their techniques in these last four years of really hard times. They’ve really developed even nastier techniques than they used before.”

Tennessee attorney Raven Perry-Beach agrees.

“I’ve heard clients go so far as to say ‘oh this creditor contacted me and said oh I’m gonna be hauled off to jail.’ There’s no debtors prison,” says Perry-Beach. “You won’t go to jail for not paying your debt.”

“Bankruptcy filings have been expanding so more and more people are walking away from debt,” says Indiana attorney Neil Waechter. “And as people struggle, it’s become harder and harder for creditors to squeeze money out of clients.

These creditors have become a lot more aggressive.”

Expect the big squeeze to continue in the new year.

3. More Bankruptcy Filings

In 2005, Congress passed a series of rules aimed at making it harder for consumers to file for chapter 7 bankruptcy. The law’s passage led to a record number of bankruptcy filings as consumers scrambled to beat the law’s enactment. Because Americans are allowed to file for bankruptcy every 8 years, Erik Graeff expects filings to tick up in 2013.

“In ‘05 there were major changes made to the bankruptcy act that made it a lot harder to file for bankruptcy. So what we’re seeing is it’s 8 years later, and all those people who went into a rush to file before those harsh ‘05 amendments got put into the law are coming back. Lots of them will have to file again.”

Kirk Goettsch also sees bankruptcies edging up.

“I like to be optimistic, unfortunately I don’t see a whole lot of reason to be optimistic. Tax laws are going to be changing, it’s going to be more difficult for middle income families to survive. Things are going to become more expensive. Health care is going to be more expensive. And the simple fact is, families carrying large amounts of debt now are going to have an even harder time surviving when their basic expenses for living are going to continue to go up.”

4. Bankruptcy, Debt Resolution Not Just For the Poor

Another eye-opening trend is the changing demographic makeup of those seeking bankruptcy and debt resolution services.

“As the economy has struggled, the type of person that has come in has become more affluent,” says Waechter. “In the initial stages of the recession, it was young people, people that didn’t have a lot of resources. Now I’m seeing clients that are making $130,000 or $140,000 a year.”

Reed has also lent his bankruptcy services to wealthy clientele.

“I had one client, they made a collective 6-figure income and they filed for chapter 13. How they got into it was overbuying properties. They owned houses in Sacramento, houses in Arizona. All the mortgages were adjustable rate mortgages – and they all adjusted. Suddenly their $2,000 house payment became a $4,000 house payment, and then they lost a renter or something. They got in during the real estate boom and everyone thought it was going to last forever, and it was not going to last forever.”

5. The Next Bubble: Student Debt

As the crisis surrounding credit card debt has begun to subside, a new bubble has emerged: student loan debt. According to estimates, there is roughly $1 trillion in total outstanding student loan debt in the United States today. The average college student is graduating with approximately $25,000 in student loan debt.

“I think that the student loan bubble is really a big issue right now,” says Waechter. “People that have decent jobs but are also burdened by this debt. And student loans are a completely different issue than the credit cards, that’s a completely different beast. But what they have done is caused people to start taking out credit cards and personal loans and extending themselves further and further financially just trying to meet their debt service to the student loans. So I think that you’re going to see a lot more young people that are highly educated trying to come in and say ‘I don’t know what to do with this any more, I don’t know how to fix this, my student loans are killing me.’”

Sheila from New Jersey didn’t have a quarter of a million bucks in the bank. She had to turn to plastic to try and pay for her daughter’s college education, and it sent her spiraling into debt. Attorney Milton Bouhoutsos, Jr., an attorney who uses Morgan Drexen for critical back office support services, pulled her out of that spiral and back to even financial ground. Bouhoutsos negotiated with Sheila’s creditors to settle her unsecured debt of more than $18,000. The retired teacher paid off her debt at a fraction of the original amount, and she couldn’t be happier.

“I guess it probably started with my daughter,” says Sheila, “helping her out when she decided to go back to school. And I knew I would not be able to help her the way I wanted to. And that was it, that was the breaking point. I said ‘I’ve got to get out of this debt – I’ve got to get out of this debt to be able to help her.”

Sheila says her attorney, Milton Bouhoutsos, Jr., put a stop to the harassing phone calls from her creditors.

“You know they were calling me, you know they were!” laughs Sheila, who wasn’t laughing back then. “The calls, the threats, ‘if you don’t do this and pay that’. They said I have to go to court. My lawyer told me any correspondence or letters – just send it to them. Pretty soon, my lawyer sent me letters saying we settled an agreement with this one, we settled an agreement with that one. It really didn’t take long.”

“He was very good,” says Sheila of her attorney. “He was very, very cooperative and understanding. He would talk to me and let me know what was going down. We talked several times. He said ‘don’t give up, don’t give up.’ It was a relief that the stress was off me, knowing someone was handling my affairs. They were very cooperative, I can’t say that enough.”

Sheila now has a better handle on her finances, and she and her daughter have devised a sensible plan to pay for college. Sheila’s attorney, Milton Bouhoutsos, Jr., is licensed to practice law in New Jersey. His focus is assisting consumers who find themselves overwhelmed by debt. Bouhoutsos keeps his fees affordable by utilizing the efficiencies offered by Morgan Drexen. The company, based in Costa Mesa, CA, provides proprietary software and paraprofessional and paralegal services to law firms across America.

Barbara, a resident of Alabama, experienced the devastation first-hand.  The tornadoes seriously damaged her home at a time when she was already struggling with major debt.  Attorney Willie Huntley III, a lawyer who uses the administrative support services of Morgan Drexen, helped take some of the financial pressure off Barbara’s shoulders.  Self-employed and living on a tight budget, Barbara had amassed more than $18,000 in credit card debt.  When the tornados hit, Huntley was already in the process of negotiating with Barbara’s creditors.  Through a process known as non-formal debt resolution, Huntley was able to settle the debt at a reduced amount.  For Barbara, it was one less crisis to worry about.

“Most of my debt was business-related,” says Barbara.  “It was a slow buildup, I just wasn’t watching what I was doing.  My creditors kept calling me and wanting to pay them and threatening to take me to court.”

It was a stressful process that began well before the tornadoes tore through her town.  Barbara still faces enormous challenges trying to get her home fixed, but she’s relieved her credit card issues have been resolved.

“I don’t have any more debt and I don’t have any more credit cards.  I’m glad it’s over.”

Barbara’s focus now is dealing with insurance companies.

“We’re in the midst of trying to fix things after the tornado.  We had a lot of damage to our home.  Now it’s getting the insurance company to cooperate and get us the money.  It’s hard to get everything replaced.”

Barbara’s attorney, Willie Huntley III, is licensed to practice law in Alabama.  He has extensive experience in numerous areas of the law including debt resolution and contract negotiation, and is trained in money management techniques.  He is one of more than a hundred attorneys nationwide who look to Morgan Drexen to provide critical front and back-office support systems.

That’s exactly what Barbara Ann from Ohio did with her 14 (yes 14!) credit cards. Deep in debt, she needed the help of attorneys who use Morgan Drexen for paralegal and paraprofessional support. Barbara Ann’s legal team negotiated with her creditors, one-by-one, to settle her combined unsecured debt of nearly $16,000. The process paid off, with Barbara Ann agreeing to pay a fraction of her initial accumulated debt. The threatening phone calls stopped, her accounts are settled, and Barbara Ann has a new outlook on life and money.

“I had like 14 credit cards, all maxed out,” she recalls. “My bill collectors were calling. I told them I didn’t have any money and they were constantly threatening me.”

Barbara Ann says after becoming unemployed she had no choice but to start charging everything. It was an empty feeling.

“I wasn’t working. Every time they would send me a credit card, I would take it and use it.”

Barbara is still getting by on a limited income. But she says she’s learned her lesson.

“My life without debt is wonderful. I’m watching what I spend now and I don’t use credit cards anymore. My attorney advised me that they could get me out of debt but I had to use my own mind to want to stay out of debt. I did exactly what they told me.”

Barbara Ann followed the advice of Ohio-licensed attorney Sara Polony, who has been associated with the Howard Law Professional Corp. Howard Law represents clients in multiple practice areas including labor and employment, business litigation, and bankruptcy. Howard Law is among the scores of law firms across the country that rely on the efficiencies created by Morgan Drexen’s proprietary software and legal support services.

Tyler of Wisconsin just wanted a new motorcycle, but even that was enough of a splurge to land him in a financial ditch. Attorney Tiffany Stockinger, an attorney who uses Morgan Drexen for a wide array of back-office legal support services, helped pull Tyler out of that ditch. She negotiated with his creditors to reduce his unsecured debt of more than $6,500. After reaching a fair deal for both sides, Tyler emerged debt-free. He admits he fell into the trap of falling in love with luxury.

“I got into debt from stupid decisions,” says Tyler. “Buying a motorcycle and maxing out credit cards – just careless spending. I was bouncing between jobs at the time, I was a truck driver.”

Tyler says he’s a lot smarter about money now, and although he’d love to be able to afford yachts, jets and motorcycles, he looks at money a little differently these days.

“It feels really good to have settled the debt and to be debt-free. I’m living within my means.”

The lure of luxury is a temptation many Americans, like Tyler, fall into. But too often the thrill of buying big is wiped out by the suffocating debt that follows. Experts say unless you have piles of cash in the bank, and the means to keep those piles growing, you should probably avoid luxury shopping. Buying high-end often leads to high-debt.

Attorney Tiffany Stockinger has based her practice on helping consumers solve their debt problems and starting them down the path to fiscal freedom and responsibility. Stockinger relies on Morgan Drexen’s legal software and paraprofessional services to streamline her law firm and keep fees affordable for her clients.

Legitimate lawyers, like the ones who use the administrative support services of Morgan Drexen, recommend people receiving such calls demand to see proof of the debt before doing anything else. As many good people have learned, the world of debt collection is tricky and filled with landmines. If you are dealing with legitimate debt, having an experienced lawyer on your side can make all the difference.

People like Thelma, a Wisconsin resident herself, fully realized the value of signing on with a lawyer who relies on the efficiencies provided by Morgan Drexen. Thelma accrued nearly $24,000 in unsecured credit card debt, most of it the result of costly medical expenses. She needed help. Attorney Tiffany Stockinger negotiated with Thelma’s creditors and settled her debt in a little over three years. She is now free of that debt.

“It’s a big weight off my shoulders,” exclaimed Thelma, a Certified Nursing Assistant. “I was getting less hours at work for the past six years and I just couldn’t keep up. I was paying the minimum and was not getting anywhere.”

Thelma says she no longer has any credit cards and is thrilled to be out of debt. She admits initially she was reluctant to sign on to the debt-resolution program offered by her attorney.

“I was skeptical at first. I mean when someone tells you I can help you get out of debt in so many months when I have been trying for two or three years. But I was very happy with the program and glad to be out of debt and thankful for the help.”

Attorney Tiffany Stockinger is licensed to practice law in the State of Wisconsin. She specializes in non-formal debt resolution, bankruptcy and family law.

Legitimate lawyers, like the ones who use the administrative support services of Morgan Drexen, recommend people receiving such calls demand to see proof of the debt before doing anything else. As many good people have learned, the world of debt collection is tricky and filled with landmines. If you are dealing with legitimate debt, having an experienced lawyer on your side can make all the difference.

That’s the situation Gwendolyn from Ohio found herself in. She piled up nearly $30,000 in credit card debt remodeling her home in hopes of making a big sale. When few buyers came knocking she knew she was in trouble. That’s when a lawyer supported by Morgan Drexen’s software and paraprofessional services came to the rescue. Attorney Justin Fernandez, of Justin Fernandez Attorney at Law, negotiated with Gwendolyn’s creditors and helped set her up on a monthly payment plan she was comfortable with. Two short years later she is now debt-free.

“We charged our credit cards for the remodeling stuff,” explains Gwendolyn. “I knew I needed financial help because I just couldn’t seem to pay off the balance.”
Gwendolyn, who is a nurse, says she took money out of her IRA to help pay off the debt. She learned a valuable lesson in the process.

“I think I had five credit cards and now I only have one which is a gas card that I pay off each month. I’m saving and budgeting and not using credit cards anymore.”
Attorney Justin Fernandez is licensed to practice law in Ohio. His areas of practice range from non-formal debt resolution to bankruptcy to elder law. He has also served as a consultant to attorneys across the country.

Fernandez is one of more than a hundred attorneys nationwide who depend on the back-office support work performed by Morgan Drexen. Based out of Costa Mesa, CA, Morgan Drexen offers software and paraprofessional services to help law firms streamline their operations and reduce costs.

After losing her job, Jacqueline of Ohio was struggling just to make minimum payments. When her credit card debt hit $31,000, she turned to an attorney whose practice integrates the Morgan Drexen platform to generate efficiencies. Attorney Justin Fernandez, an attorney based out of Cincinnati, and his support staff, aggressively negotiated with Jacqueline’s creditors and settled her debt in about two-and-a-half years. She is now free of credit card debt.

“I had been on my job for 21 years,” explains Jacqueline. “Then my job was eliminated. Once my job was eliminated, I didn’t have the source of income to even pay the minimum amounts.”

Jacqueline says the credit card companies had little sympathy for her plight.

“The harassing phone calls began, which was something that I never had before. When I tried calling my bill collectors after my job was eliminated they didn’t want to work with me at all.”

Attorney Justin Fernandez, using the software and paralegal support services of Morgan Drexen, helped put an end to the fear and frustration.

“As he began to work with my creditors, my debt started eliminating – rapidly,” says Jacqueline. “It’s a great feeling.”

The Justin Fernandez Attorney at Law Firm specializes in helping those who fall prey to the consumer credit industry. Attorney Justin Fernandez has been licensed to practice law in Ohio since 1994.

Morgan Drexen, based out of Costa Mesa, CA, is focused on assisting attorneys across the country by providing them with time and cost-saving software and support services.